Apple chief executive Tim Cook has insisted that the iPhone maker does not
have its head "stuck in the sand", as he gave the strongest signal yet the
company is working on an important new product.

Shares in Apple have slumped by more than a third since September over concerns about the company's ability to keep innovating amid increased competition from the likes of Samsung.

"We're really aware of the competition as well," Mr Cook told shareholders at Apple's annual meeting in Cupertino, California. "We don't have our head stuck in the sand."

Apple, which is famously secretive about its gadgets, is working on "new categories" for products, Mr Cook said. The company is reported to be developing a watch that would perform some of the functions that an iPhone currently does.

A tumbling share price has also raised the pressure on Apple to return more of its $137bn (£90bn) cash pile to investors. On Wednesday, the shares fell 1.2pc to $483.71.

An early tally of the votes cast before the meeting showed at least a third of shareholders declined to back the compensation package for Mr Cook, whose basic salary rose more than 50pc last year even though his overall compensation slumped.